Alltel Corp. followed its disappointing fourth quarter financial results with reduced 2001 financial forecasts last Thursday, including slower customer additions and plans to cut 1,000 jobs through early retirements and layoffs.
For the year, Alltel expects diluted earnings per share to range between $3.20 and $4.35 per share, with earnings per share from current businesses expected to range between $2.85 and $3 per share, down from previous estimates of between $3 and $3.10 per share. ING Barings L.L.C. said it was expecting earnings per share of $3.07 prior to the adjustment.
Alltel did increase its forecasts for subscriber growth from between 2.3 million customers and 2.4 million customers to between 2.4 million and 2.5 million customer additions for the year. Customer churn is expected to be between 2.4 percent and 2.5 percent, ahead of earlier expectations of between 2.1 percent and 2.3 percent. The increased churn is expected to cut net customer additions from between 550,000 and 600,000 customers to between 500,00 and 550,000 customers. Analysts surveyed by First Call/Thomson Financial expected net additions of 592,000 customers.
The company also announced reorganization plans for its regional and corporate operations expected to reduce the communications work force by about 1,000 positions. The reorganization will reduce the number of operating regions from five to three, with regional headquarters remaining in Cleveland; Charlotte, N.C.; and Little Rock, Ark. Alltel currently employs approximately 27,000 people.
“This reorganization reaffirms Alltel’s commitment to grab its share of the customer growth in the wireless business,” said Scott Ford, president and chief operating office for Alltel. “As we enter 2001, it is imperative that Alltel have a flexible and responsive organization that can compete aggressively. We must continue to simplify and streamline Alltel’s entire organization to maintain customer and earnings growth in an increasingly competitive environment.”
Analysts expected the news to weaken Alltel’s stock that has seen more down’s than up’s since it released fourth quarter results.
“We continue to believe that Alltel is a well-run telecom that is likely to be a solid company well into the future,” said Michael Hodel, analyst with Morningstar.com, in an analyst note last Thursday. “But as today’s guidance indicates, the firm isn’t a terribly fast grower. As a result, investors need to pay close attention to price before jumping in. Alltel’s shares have fallen steadily over the past couple of weeks, but they still have a little way to go before we would consider them a compelling value.”
Alltel’s stock rose slightly on the news to $54 per share, just off its 52-week low of $47.75 set last September.
